Deals and Development: The Difficult Dynamics of Sustaining Growth Episodes in 'Deals' Countries

An important puzzle in the economics of growth is that “good institutions” seem to be necessary to achieve high levels of per capita income (aside from pure resource rich countries) but that all of the episodes of very rapid growth begin in periods of weak institutions. This raises the questions of (a) how episodes of rapid growth are initiated in periods of weak institutions and (b) what is the relationship between economic growth and the dynamics of the quality of institutions. The first answer something like: a move to “growth friendly closed ordered deals” can substitute for “good rules” and “strong institutions” in initiating growth episodes. The answer to the latter appears to be: “anything can happen”—that is, some episodes of growth, even if initiated with closed ordered deals evolve stronger institutions and transition towards “rules” systems while in other episodes of closed ordered deals undermine institutions, which leads to a (reasonably) predictable pattern of politically driven collapse of regimes which ends growth episodes and can lead to subsequent growth episodes from horrific (e.g. Liberia) to crisis (e.g. Egypt) or long-run stagnation until a new deals regime emerges. How, and whether, conscious action of any agents can be successful in modulating these difficult dynamics of deals economies is a (the?) super pressing research question.